Market digests recent issuance; Banco Panamericano prices notes; BMG, Chile coming soon

By Christine Van Dusen

Atlanta, July 28 - Emerging market investors on Wednesday shrugged off yet another negative economic report from the United States and embraced risk, putting money to work while digesting the recent surge of supply.

The heavy level of new issuance of the last few weeks made for a slow day in the primary market, with just Banco Panamericano SA pricing a deal on Wednesday.

But issuance is expected to pick up a bit as the week goes on, sources said.

"New issues are still taking the focus of real money," a trader said. "Fears of euro-region debt issues and a double-dip recession" have been put on the back burner, and "risk appetite has come back."

The day was "very busy," a Zurich-based trader said.

Anxieties fade

Yields on 10-year Treasuries declined a touch on news that durable goods orders in the United States were weaker than expected in June, according to a Commerce Department report. And tensions continued between Colombia and Venezuela.

But "I don't think people are paying a lot of attention to any of those headlines," said Luz Padilla, portfolio manager for the DoubleLine emerging markets fixed income fund. "They're really shrugging off the negative news. A large part of that is a sense of relief that the negative potential from Europe is dissipating and in the U.S., while things may be looking bad, they're maybe not as bad as people had expected."

Still, not all the news was rosy for emerging market debt.

Of the issues that printed recently, Brazil's $750 million add-on to its $787.5 million 4 7/8% notes due 2021 - which priced at 102.707 to yield 4.547% - "was OK," a market source said.

"I think for a lot of people, especially if you were underweight on the credit, it was a good way to sort of increase your position. But it moved up to where it was before, so if you participated you got a point or so, which is fine but just not great. It's hard, but yields are low, generally speaking, so that makes it harder."

Barbados notes trade well

Overall, prices were "a little lower on the higher beta credits" and volumes were "down a little from the prior week" on Wednesday, the trader said.

Most names were trading "decently," a market source said. "There aren't runaway successes. They're all up a little bit and holding value."

One issue that stood out was the $200 million 7% notes due 2022 from Barbados, which priced Tuesday at 98.411 to yield 7.2%, or Treasuries plus 416.2 bps.

"People felt that it was priced cheaply. That was up a couple of points" by the market close on Wednesday, a source said. "That seems to have done well."

For the day, the JPMorgan Emerging Markets Bond Index Global Diversified spread was at 302 bps, up slightly from 299 bps on Tuesday. That move wasn't particularly notable, Padilla said. But she noted the EMBI Global was at 355 bps in June, a 50 bps move within the month. "That's pretty significant," Padilla said.

Panamericano prices

In the primary market on Wednesday, Brazil-based lender Banco Panamericano's $300 million 5½% notes due 2015 priced at 99.462 to yield 5 5/8%, or Treasuries plus 385.7 bps, a market source said.

Bradesco BBI, UBS and Banco Itau were the bookrunners for the Regulation S-only deal, which was whispered to yield 6%.

Brazilian lender Banco BMG could follow closely on Panamericano's heels. BMG is expected to issue 10-year tier 2 notes via BCP Securities, Morgan Stanley, Banco Bradesco and Santander on Thursday. The yield was being whispered on Wednesday at about 9 1/8%, the Zurich trader said.

"That's about 25 or 35 [bps] cheap to the existing 2019 bond," a market source said.

Also expected to come to market this week is the awaited $1.5 billion dollar- and peso-denominated notes due 2020 from Chile via Citigroup, HSBC and JPMorgan in a Securities and Exchange Commission-registered deal.

"That seems to be more interesting because of the scarcity value," the market source said. "Chile is a pretty strong credit. I think that one should go well."

ENAP, Philippines plan issues

Another Chilean issuer, quasi-sovereign oil and gas company La Empresa Nacional del Petroleo (ENAP) is looking to sell $500 million in bonds as soon as the Aug. 2 week, a market source said.

No other details were available on Wednesday.

Also looking to do a deal was the Philippines, which could soon issue dollar- and peso-denominated bonds, a market source said. This would "make a lot of sense, given where yields are. The Philippines' spreads have reached a recent sort of low, so it makes sense for them to issue. With Treasuries where they are, that makes for a low coupon," the source said.

Another deal that could come to market soon is the $250 million bonds from Peru-based lender Corporacion Financiera de Desarollo (Cofide). Market-watchers were also whispering about potential notes due 2022 from Cayman Islands-based Manila Cavite Toll Road Finance Co.

And Turkey could do a drive-by.

"What they usually do is announce and then shut down the book within a couple of hours because they can," Padilla said. "I would imagine if that happens it probably would happen on Monday, one of those quick turnaround things."

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